THE DISTILLERY: Parity parrots

"The dollar is still rising, the dollar is still rising". The Henny Pennies in the backyard were still at it this morning, cackling their warnings as the Big Aussie battled its way to 99.94 USc overnight. But there was a change from yesterday, the chooks have linked up with the 'Rate Rise Looms mob', so now the argument is whether the dollar's strength will or won't mean a rate rise. But first, competition authorities in Germany and Japan have taken a public stand against the huge iron ore joint venture idea between BHP Billiton and Rio Tinto.

Bloomberg reported this morning that BHP Billiton and Rio Tinto haven't decided any "next steps” for their proposed iron ore venture after Japanese and German regulators objected to the plans. BHP and Rio "have noted with disappointment the statement today by the German Federal Cartel Office that its current intention is to prohibit” the venture, the companies said today in a joint statement. "No decisions about next steps have been taken at this stage while regulatory discussions continue." Japan's regulator today said it's "concerned” the venture may limit competition. "The Japan Fair Trade Commission told the two mining companies of its concern over a possible violation of antimonopoly laws on September 27," Bloomberg said. Tomorrow's commentary material today. Hot off the laptop.

But its the prospect of parity for the dollar with the greenback (and not the Chinese currency, which is has the largest weighting in our Trade Weighted Index at 22 per cent, against the greenback's 8.5 per cent, less than the euro in fact, but no one has pointed that out this morning). The Australian Financial Review said the dollar had flirted with parity last night "as markets bet on US stimulus". 'Hello sailor, want a good time. Parity resisted the come-on, again, playing hard to reach.

Fairfax's Elizabeth Knight scolded us for being interested in what happens when the buck meets Ms Parity: "We have all become obsessed by parity. Some financial type called Clifford is throwing a parity pool party at the Sydney's hot spot the Ivy. (Just mention his name and you can get through the door and share in the fun.) However, once you look past the froth and excitement, the reality is that we are in a global currency war and Australia has yet to pick up a weapon. Perhaps there is insufficient focus on the international battle because we are so drunk from two weeks of celebrating (near) parity. But given much of the appreciation in the dollar is the result of the US government trashing the value of its own currency, a large part of our currency's direction will be in the hands of the US Federal Reserve." Another bottle of bubble, I think, don't you?

The dollar's rise has thrown the 'Rate Rise Looms' mob into confusion, as David Uren on The Australian reports: "The soaring value of the Australian dollar is putting pressure on the Reserve Bank to reverse course on its planned interest rate rises. The Australian dollar yesterday hit its highest level since being floated 27 years ago and appeared headed for parity with the US currency. Fresh selling of the US dollar on world markets and growing speculation that commodity prices may rise even higher pushed the Australian dollar to a record US99.94c in late trade yesterday." It eased and is now at just over 99 USc this morning. Oh, down nearly a cent, change the headline, 'Dollar plunges'.

The Australian's John Durie says: "The Australian dollar's potential parity with the greenback is of course a talking point and, as such, an economist's delight. A floating currency is economically pure and is a big plus for the flexibility of the Australian economy. Perhaps no subject allows more freedom to say on the one hand this and on the other that, but the bottom line is largely negative for Australia."

But Michael Stutchbury, The Australian's Economics Editor, says: "The super-strength Aussie dollar is heading towards greenback parity. Australian interest rates are among the most elevated in the Western world. Prepare for both to move higher. That's because the Reserve Bank remains set to tighten monetary policy from its "neutral" setting as a once-in-a-century mining boom pushes the economy to full capacity. And it doesn't think our strong dollar is out of wack (sic) with the economy's fundamental China-fuelled strength. The double-whammy of higher interest rates and a stronger dollar will intensify the pressures now squeezing non-mining businesses exposed to foreign competition, including manufacturing, farming, tourism and universities." Nice to see every angle covered in The Australian this morning.

Elsewhere, Business Spectator's Stephen Bartholomeusz says JPMorgan Chase's investment bank had a poor third quarter...good or bad for Macquarie: "Until there is more capital markets and client activity the potential of the new Macquarie model will remain unknown but it would appear that the big global investment banks will eventually look more like Macquarie than their pre-crisis selves, which may not necessarily be a positive for Macquarie, which expanded globally by developing within niches the globals had largely over-looked. In the near time Macquarie has nearly $6 billion of equity investments in its balance sheets that it can gradually sell to help maintain its earnings through to better times."

The Australian Financial Review's Chanticleer says: "Tabcorp is facing no shortage of challenges but its innocuous looking animated racing game Trackside has some pundits optimistic it could be a poker machine-style cash cow of the future."

And The Australian's Tim Boreham looks at the deal of the year: "BCD Resources, owner of Tasmania's Beaconsfield mine, was rescued in the nick of time by phosphate dabbler Minemakers. On Wednesday, BCD faced winding up due to merger partner Bendigo Mining's default notice on an $8 million loan. With repayment looming, salvation came yesterday from Minemakers, which paid the loan and promised up to $7 million more. But don't chalk up this one to Mary MacKillop just yet, given the heavy dilutionary cost to BCD holders. Minemakers will have the right to convert its loan to equity at a lowly 2 cents a share, thus snaring 64 per cent of BCD." BCD Resources shares fell 65 per cent yesterday from the 14.5 cents they had been trading at, to 5.2 cents. Bendigo Mining shares rose.

Finally, even though BHP has run into a roadblock on iron ore, in its Potash play in Canada, the company is no doubt as amused as Matthew Stevens on The Australian was to read that Potash CEO, Bill Doyle wants the Canadian government to allow competing bids to the one from BHP, and for BHP's to be blocked, sort of: "That's pretty weird when you consider claims the potash prince has also been urging his company's home provincial government, Saskatchewan, to block the BHP offer for his company for two years or, at least until the Global Australian starts building its own $US12 billion Jansen potash project. As illogical as that might sound, Doyle seems to be presenting the idea that alternatives to BHP, including potential deals involving China's Sinochem, for example, are good but BHP's bid is bad. That said, Doyle's latest commentary, delivered as a letter to his "colleagues" at Potash Corp, appears to confirm claims that the boss, who is sitting on $US500 million in options, is a ready seller of the business at the right price." Who said Australia was the 'wild west' of global mining?